🕯️ Chart analysis for beginners: How to read candles and basic indicators
Hello everyone! When first looking at the trading screen, the dancing green and red columns can be dizzying. But in reality, that is the "language" of the market. Today, we will learn how to read these symbols in the simplest way.
1. What is a Japanese candle?
Each candle represents price movement over a certain period (1 hour, 1 day, etc.).
Candle body: A green color means the price is rising (the closing price is higher than the opening price), while a red color means the price is falling.
Candle wicks (Shadows): The thin lines above and below the candle body. The longer the upper wick, the stronger the selling pressure; the longer the lower wick, the stronger the buying force is at the bottom.
2. Important reversal candle patterns
You don't need to memorize hundreds of candle patterns, just remember these two basic types:
Hammer Candle: Appears after a price drop with a very long lower wick. This is a signal that "buyers have returned," indicating that the price may reverse upwards.
Doji Candle: The candle body is extremely small, resembling a plus sign. It shows market hesitation. After a Doji, there will often be a strong price movement.
3. RSI indicator: The "thermometer" of the market
The Relative Strength Index (RSI) helps you know whether the market is "overheated" or "overcooled":
Above 70 (Overbought): Everyone is overly excited; be careful as the price is about to adjust downwards.
Under 30 (Oversold): Everyone is fearful and selling off; this is often a cheap price range to consider buying.
4. Trading volume (Volume)
Never look at the price without considering Volume. If the price rises but Volume is low, that could be a fakeout. A sustainable uptrend must be accompanied by exceptionally high Volume columns.
💡 Conclusion: Technical analysis is not about predicting, but managing probabilities. Start observing from larger time frames (4H, 1D) to get the best overview before investing!